Overall economy in July 2008
continued to expand from
the previous month. Both consumption and investment
indicators improved, corresponding with a notable
acceleration in imports. Meanwhile, exports still
expanded markedly. On the supply side, major crops
production and price grew well, resulting in an
accelerated farm income. Manufacturing production
increased at a rate close to that of the previous month.
Nonetheless, tourism sector somewhat slowed down.

External stability remained sound, in line with high
level of international reserves. Regarding internal
stability, both headline and core inflation remained
high.

International Reserves

Year

2003

2004

2005

2006

2007p

2008 p 1/

Billion US$

42.1

49.8

52.1

67.0

87.5

104.7

Source: Bank of
Thailand

Prime
Minimum Loan Rates

Year

2003

2004

2005

2006

2007p

2008p1/

Rate
%

5.50-5.75

5.50-
5.75

6.50-6.75

7.50-8.00

6.85-7.13

7.25-7.50

Average of five
largest commercial banks.

Source: Bank of
Thailand

Details of the economic conditions in
July 2008 are as follows:

1 The Manufacturing Production Index (preliminary)
rose by 10.9 percent year-on-year (yoy), comparable to
the rate of 11.2 percent (yoy) in the previous month.
Export-oriented productions continued to expand
satisfactorily, in line with external demand. This
included productions of electronics, vehicles, food,
and iron and steel products. The capacity utilization
rate in July 2008 stood at 71.9 percent, lower from
73.1 percent in the previous month. This was due
partly to capacity expansion in electronics industry.
When seasonally adjusted, the rate was close to that
of the previous month.

2 Private Consumption Index (PCI) increased by 9.3
percent (yoy). This stemmed from an acceleration in
VAT at constant price and an increase in imports of
consumer goods at constant price. At the same time,
passenger car sales also observed a satisfactory
growth rate, and motorcycle sales expanded well in
line with the continuous improvement in farm income.
Private Investment Index (PII) (estimated) increased
by 3.9 percent (yoy), improving from last month. This
was due mainly to an acceleration in imports of
capital goods at constant price.

3. Fiscal Position. The government's gross revenue
collection was 124.9 billion Baht, increasing by 12.6
percent (yoy). This mostly followed tax revenue which
grew by 14.4 percent (yoy), in line with expansion in
most tax bases. In particular, consumption tax drove
up, as a result of increased VAT collection from
import expansion and higher domestic prices. Excise
tax rose, mainly in line with tax collected on liquor.
This was due to production hoarding as producers
expected liquor tax ceiling to adjust upward.
Meanwhile, specific business tax declined because of
the measure to reduce specific business tax on
property transactions as well as lower tax income
based on financial institutions' transactions. The
government's cash balance recorded a deficit of 31.2
billion Baht, with net repayment of 30.5 billion Baht.
Consequently, the treasury cash balance at end-July
was 127.2 billion Baht, lower by 61.7 billion Baht
from the previous month.

4. External Sector. Despite a large export expansion,
the trade balance was in a deficit of 762 million US
dollars as import accelerated considerably. Export
value totaled 16,787 million US dollars, growing by
43.9 percent (yoy), largely from export volume.
Agriculture category continued to observe favorable
growth, particularly rice and rubber exports.
Manufacturing category rose well, in line with exports
of petroleum products, vehicles, computers, as well as
precious stone and jewelry which benefited from an
increase in gold exports. Meanwhile, import value
totaled 17,550 million US dollars, increasing by 53.4
percent (yoy), mainly from import volume. Import price
increased at a rate close to that of the previous
month, while import volume accelerated across all
categories, particularly raw materials and capital
goods. This corresponded with the increase in exports.
Moreover, fuel and lubricant category saw an increase
in crude oil import compared to the preceding month,
as some oil refineries resumed normal operation.
Import of liquefied petroleum gas (LPG) also picked up,
following greater domestic demand for use as vehicle
fuel.

Services, income, and transfers account recorded a
surplus of 208 million US dollars. Together with the
trade balance deficit, the current account registered
a deficit of 555 million US dollars. According to
preliminary data, net capital flow1/ in July 2008 was
in a deficit of 1,799 million US dollars. This mostly
followed the outflows of both Thai and foreign
portfolio investment. Consequently, the balance of
payments was in a deficit of 680 million US dollars.
International reserves as of end-July 2008 stood at
104.8 billion US dollars with a net forward position
of 16.6 billion US dollars.

1 Headline inflation remained at a high level of 9.2
percent (yoy), in line with prices of raw food and
energy. Higher production costs were thus passed on to
prices in non raw-food-and-energy categories. This was
in spite of downward adjustment of retail oil prices,
towards the end of month, following world market
prices and government's excise-tax reduction policy.
Consequently, core inflation increased to 3.7 percent
(yoy). Price increases were observed in the categories
of prepared food at home and food away from home,
shelter, and public transportation services. The
Producer Price Index (PPI) rose by 21.2 percent from
the same period last year, due to increases in all
categories.

Inflation

2008p

2007p

2006

2005

2004

2003

Headline Consumer
Price Index (2002=100)

123.9

117.0

114.4

109.3

104.6

101.8

(% change)

6.6

2.3

4.7

4.5

2.7

1.8

Core Consumer
Price Index (2002=100) 2/

107.8

105.6

104.5

102.2

100.6

100.2

(% change)

2.4

1.1

2.3

1.6

0.4

0.2

2 Monetary Conditions. Deposits of
depository corporations2/ declined by 1.7 percent (yoy).
However, when taking into account Bills of Exchange
which were similar to deposits, the deposits expanded
by 1.8 percent (yoy). Private credits grew by 10.3
percent (yoy), continuing to accelerate from the
preceding month in line with an increase in the
credits extended to business sector.

Money market interest rates adjusted slightly upward.
The 1-day repurchase rate and the overnight interbank
rate averaged at 3.38 and 3.35 percent per annum,
respectively. This corresponded with the MPC's
decision, on 16 July 2008, to raise the policy rate by
0.25 percent per annum to 3.50 percent per annum.

From 1-25 August 2008, the 1-day repurchase rate and
the overnight interbank rate averaged at 3.50 and 3.49
percent per annum, respectively.

Exchange Rate and Nominal Effective Exchange Rate (NEER).
In July 2008, the Baht averaged at 33.50 Baht per US
dollar, depreciating from the June's average of 33.20
Baht per US dollar. This was in line with importers'
demand for US dollars, particularly oil companies.
This was accompanied by foreign investors' continual
outflows from the stock exchange as well as the
weakening of the Baht against major currencies such as
the US dollar and Euro. As a result, the NEER declined
from 76.76 in the previous month to 75.68.

Exchange rate

2008p

2007p

2006

2005

2004

2003

Baht : US$ (Reference
rate) average (Baht : 1 USD)

33.50

34.56

37.93

40.27

40.27

41.53

From 1-25 August 2008, the Baht
depreciated slightly further to an average of 33.78
Baht per US dollar. This was attributed to the
continuation of steadily-enhanced confidence towards
the US dollar as well as importers' demand for US
dollars.